Kellogg’s global supply chain is under growing pressure due to climate change. Kellogg both contributes to and is adversely impacted by climate change. Patterns of increasingly extreme weather pose significant threats to the suppliers from which Kellogg sources many of its ingredients. However, the company is taking steps to address the threats posed by climate change by curbing energy use, reducing water use, limiting waste, and sourcing products from responsible partners1.
Climate change is concerning to Kellogg because it threatens to disrupt the company’s supply chain. Kellogg procures its main ingredients, including wheat, corn, rice, potatoes, and sugar, from a complex global network of farmers around the world2. Many of these growers live in developing countries and have historically relied on precise climate conditions to prosper. However, the impacts of climate change, including hotter average temperatures, more severe weather patterns, and rising global sea levels, threaten the delicate climate balance that has allowed farmers in developing countries to be competitive in the global market3. If these farmers can no longer produce reliable crop outputs, Kellogg’s supply chain will be interrupted, as the company’s partners will no longer be able to grow enough crops to meet demand. If we amplify this issue across the entire food and beverage landscape, it is plausible that there will be significant global food shortages in the future due to the impacts of climate change.
Kellogg has taken several steps to address climate change4, utilizing a strategy combining adaptation (responding to climate change) and mitigation (lessening the company’s contribution to the drivers of climate change). The company’s short-term goals revolve around adaptation. Kellogg is making efforts to help its suppliers increase acreage outputs and become less vulnerable to the impacts of climate change by educating farmers on smarter, more adaptable farming practices. In the medium term, Kellogg plans to implement mitigation strategies to reduce its contribution to climate change. The company has committed to reducing greenhouse gas emissions and energy consumption by utilizing renewable energy, rather than fossil fuels, in many of its facilities. Kellogg also plans to reduce the amount of material used in its packaging, thereby reducing the amount of fuel consumed (and, therefore, greenhouse gases emitted) transporting materials to manufacturing plants. Additionally, Kellogg is seeking to reduce the amount of water used in its production facilities to lessen its burden on the global clean water supply, thus increasing water availability for its supply chain partners globally and aiding in their survival and the supply chain’s continuity. Finally, the company plans to thoroughly vet its suppliers and focus its procurement efforts on sourcing from responsible producers who practice sustainable and environmentally friendly farming practices.
In addition to the climate change adaptation and mitigation steps to which Kellogg has already committed, I would suggest that Kellogg explore packaging material alternatives in the short term and identify supply chain localization opportunities in the medium term. Many of Kellogg’s products include plastic components, a major ingredient of which is petroleum5. Petroleum is a fossil fuel whose extraction has been linked to geological instability6 and whose use is a major source of greenhouse gas emissions7. By switching to alternative packaging materials, Kellogg will be able to help the world move away from its reliance on fossil fuels like petroleum and further mitigate its contributions to climate change. Additionally, Kellogg should explore building a more localized supply chain. Currently, Kellogg procures ingredients from around the world, ships them to factories, and distributes the final products to its global customer base. If Kellogg can move major operations closer to its main ingredient sources or procure ingredients from suppliers closer to its production facilities, the company would be able to minimize the amount of transportation used in its supply chain. Transportation, especially the use of petroleum product-burning cargo ships and trucks, is a major producer of greenhouse gases, which contribute to climate change8.
One of my main open concerns about the context of climate change as it relates to Kellogg’s supply chain surrounds how the company plans to balance shareholder financial demands with the increased cost basis required to address climate change concerns. Will shareholders accept depressed financial returns in exchange for a more environmentally friendly business model? Are consumers willing to pay more for products created using sustainable supply chains? If so, is Kellogg able to educate the population on its practices and pass the increased costs through to customers in the form of higher prices?
1Kellogg Company, “Kellogg 2016/2017 Corporate Responsibility Report,” June 2017.
2Kellogg Company, “Kellogg Company Global Sustainability 2020 Commitments Goals,” July 2015.
3Port of Long Beach, “Port of Long Beach Climate Adaptation and Coastal Resiliency Plan,” Fall 2016.
4Kellogg Company, “Kellogg 2016/2017 Corporate Responsibility Report,” June 2017.
5U.S. Energy Information Administration, “Frequently Asked Questions,” https://www.eia.gov/tools/faqs/faq.php?id=34&t=6, accessed November 2017.
6Anna Kuchment, “Drilling for Earthquakes,” Scientific American 315 (2016): 46-53.
7Lee Chapman, “Transport and climate change: a review,” Journal of Transport Geography Volume 15, Issue 5 (September 2007): 354-367.